Calcutta High Court
Jagatdal Jute And Industries Ltd. vs Commissioner Of Income-Tax And Anr. on 16 January, 2004
Equivalent citations: (2004)188CTR(CAL)593, [2004]266ITR587(CAL)
JUDGMENT Aloke Chakrabarty, J.
1. This is an appeal under Section 260A of the Income-tax Act, 1961, challenging the judgment and order passed by the Income-tax Appellate Tribunal on January 14, 2003, dealing with the assessment of income of the petitioner company for the assessment year 1996-97.
2. The facts relevant for the purpose of disposal of the present appeal are that the assessee-company mainly engaged in the business of manufacture and sale of jute goods, filed its return of total income in respect of the financial year ending on March 31, 1996, declaring the assessable income as nil. The return was filed with tax audit report of its chartered accountants in the prescribed form and with statement of particulars also in the prescribed form.
3. The Assessing Officer completed the income-tax assessment of the assessee for the said assessment year 1996-97 by assessment order dated March 31, 1999, passed under Section 143(3) of the Act. While passing the said assessment order, the Assessing Officer disallowed under Section 43B of the Act deduction of a sum of Rs. 2,60,809 on account of bonus paid to the employees of the assessee-company beyond the due date applicable in its case for furnishing the return of income under Section 139(1) of the Act.
4. On March 14, 2000, the Assessing Officer issued a notice to the assessee under Section 154 of the Act proposing to rectify the assessment order dated March 31, 1999, on the ground that certain payments by way of provident fund contributions and employees' State insurance contributions having been made by the assessee-company as an employer beyond the due dates as evident from the record. The proceeding initiated on the said notice under Section 154 of the Act, was concluded after hearing and by an order dated March 28, 2000. The Assessing Officer passed the order of rectification disallowing the sum of Rs. 39,01,314 on the ground that the said amount had been paid by the assessee-company after the due date as per the relevant Acts/Rules. The appeal filed by the assessee against the said rectification order was allowed by the appellate authority with appropriate directions. The Revenue preferred the appeal against the said judgment and order before the Tribunal which was decided by the judgment and order dated January 14, 2003, and challenging the same, the assessee preferred the present appeal.
5. Heard Mr. Poddar, learned counsel for the appellant, and Mr. Dutt, assisting Mr. Mehir Bhattacharya, learned counsel for the Revenue.
6. The main contention of the appellant is that after the assessment order was made by the Assessing Officer, the notice under Section 154 for rectifying the said order, could not be issued as on the face of the records no mistake was apparent and therefore, notice was bad as the requirement of Section 154 was not satisfied. It is stated that the mistake for which the said notice was issued, as contained in the said notice itself, was the mistake in not adding back/ disallowing provident fund contribution and employees' State insurance contributions paid after the due dates. The records available with the authority concerned, at that stage, was the audit report submitted by the assessee as was prepared under Section 44AB of the Act along with the statement of particulars in the prescribed Form No. 3CD and the statement of tax, duty or other sum debited to the profit and loss account but not paid during the year ended March 31, 1996, which was made the annexure 4 to the said audit report and copies of the said documents have been annexed to the petition of appeal here as annexure P 1. These documents and the materials available therefrom, it is contended by learned counsel for the appellant, do not and could not show any mistake apparent on the face of the records entitling the authorities to issue notice under Section 154 for the alleged finding that the said amounts were paid after the due dates. The statement at said annexure 4, above referred to, only shows particulars of payments, amount of payments and dates of payments in subsequent year and from the said particulars it could not be held that any amount referred to therein was paid after the due dates.
7. The next contention of the appellant is that for exercising power under Section 154 for rectification, the mistake must be apparent on the face of the records and unless the said condition is satisfied, notice is bad. In this connection, reliance was placed on the judgment in the case of T.S. Balaram, ITO v. Volkart Bros. ; CIT v. Hero Cycles Pvt. Ltd. and Star Rolling Mills P. Ltd. v. CIT [1988] 174 ITR 396 (Cal).
8. The next contention of the appellant is that when in respect of a particular question two views are possible and a controversy is existing, on such question power under Section 154 cannot be exercised. It is stated that in respect of the present question under consideration views have been taken by the two Tribunals and two Benches of the High Court which is the same as contended by the assessee and the Assessing Officer, in such circumstance, could not issue notice under Section 154. The said judgments of the Tribunal and the Benches of the High Court, as referred to, were in the cases of Flurd Air (India) Ltd. v. Deputy CIT [1997] 63 ITD 182 (Mumbai); Hallmark Automation Pvt. Ltd. v. Asst. CIT [1996] 54 TTJ 523 (Delhi) and by a learned single judge of this court in the case of Mozufferpore Electric Supply Co. Ltd. v. ITO [1982] 134 ITR 102.
9. It is contended by the appellant that the provident fund contributions and the provident fund contributions under pension scheme for the month of February, 1996, were disallowed initially by the Assessing Officer but subsequently allowed deduction in the appeal as also by the Tribunal. Therefore, the only items forming the subject-matter of discussion in the present appeal are the amounts towards provident fund contributions, provident fund contributions (pension scheme), employees' State insurance contributions of head office and mill for the month of March, 1996. It is contended that for the purpose of finding the due dates by which the said amounts are payable, section 139 is to be looked into wherein the due date prescribed as the last date of filing of income-tax return by the concerned assessee under the law prevailing for the relevant period and the said date being November 30, 1996, for the relevant assessment year in the present case, the amounts aforementioned paid in May and June, 1996, could not be treated as paid after the due dates.
10. It is further contended, in this connection, that even if the due dates to the respective statutes under which those contributions are payable, are to be considered, those payments being for the last month of the particular assessment year, did not even fall due during the same assessment year and therefore, for the purpose of finding the due dates under the said Act, it required consideration of the dates on which the respective salaries were payable to the workmen, the period granted by the respective statute for payment of said respective amounts and the grace period which was provided by the notification issued under the statutory provision by the appropriate authorities. Two fold argument has been advanced in this matter the first of which is that in the absence of the aforesaid materials, there was no mistake apparent on the face of the records justifying issuance of notice under Section 154 and secondly in fact the payments were not made beyond the due date and therefore, the notice and the proceeding following the same are bad.
11. Mr. Poddar, learned counsel for the appellant, referred to the judgments in the case of Srikakollu Subba Rao and Co. v. Union of India decided by the Division Bench of the Andhra Pradesh High Court for holding that Section 43B of the Income-tax Act can have no application to cases where the statutory liability which was incurred in the accounting year is also not payable according to the statute in the accounting year and for applying the provisions of the said Section 43B not only should the liability to pay the tax occur in the accounting year but the tax also should be statutorily payable in the accounting year. Reliance was also placed on the judgment in the case of CIT v. Edcons (India) Pvt. Ltd. [1992] 198 ITR 86 decided by a Division Bench of this court also holding that if it is found that the amount was not statutorily payable in the accounting year, in that event the provisions of Section 43B will not apply.
12. The last contention of the appellant is that the law in this connection as contained in Section 43B has been amended by the Finance Act, 2003, with effect from April 1, 2004. Therefore, this present contention on the basis of the said amendment could not be argued before the Tribunal. But it is contended by the appellant, in such a view of the matter of an amendment taking effect subsequent to the Tribunal's order the argument on law can be advanced for the first time in this appeal as the Tribunal's order was passed on January 14, 2003, and the said amendment was published in the Official Gazette on may 14, 2003. In this connection, reference was made to a judgment in the case of H. Shiva Rao v. Cecilia Pereira and Mst. Rafiquennessa v. Lal Bahadur Chetri, .
13. The contention in this connection is that though the amendment was brought subsequently with effect from the subsequent date, the same has to be retrospective operation so far as the present assessment year is concerned as otherwise serious inconsistency will take place. It is contended that the first proviso under Section 43B was inserted in the statute book by the Finance Act, 1987, with effect from April 1, 1988, but for finding inconsistency and serious consequence, the Supreme Court held it to be effective from April 1, 1984, in the cases of Allied Motors (P.) Ltd. v. CIT . Reliance was also placed by learned counsel for the appellant on the judgment in the case of CST v. Bijli Cotton Mills ; CTO v. Sri Venkateswara Oil Mills ; Union of India v. Additional Member, Board of Revenue [1975] 36 STC 61 (Cal) ; CIT v. Straw Products ltd, ; Sterling Foods v, CIT [1991] 190 ITR 275 (Karn) and Belland v. Smt. Banarsi Debi [1962] 46 ITR 28 (Cal).
14. The contention further in this regard is that if the amendment is allowed to take effect only from April 1, 2004, then any assessee paying statutory dues after completion of the assessment year though the amounts actually become payable after the close of the assessment year, no deduction can be allowed. This will result in serious consequence as for the last period of the assessment year though the amount paid becomes due after the close of the assessment year and the amount is paid in due time by the assessee, no deduction will be allowed. This cannot be the intention of the Legislature and therefore taking a similar view as was taken in the case of Allied Motors (P.) Ltd. , this contention of the appellant is to be accepted.
15. Reliance was also placed on the judgment in the case of CIT v. Podar Cement Pvt. Ltd. .
16. On behalf of the Revenue, their counsel has contended that the amounts towards provident fund and employees' State insurance contributions are paid under the beneficial legislation and an assessee is entitled to deduction for such amounts only if these amounts are paid within due dates prescribed by the beneficial legislation and within the due date as prescribed for filing income-tax return by the assessee. In this connection reference was made to the provisions of law as contained in Section 2(24)(x) and Section 36(1)(va). It is stated that under the said statute, provident fund contribution was to be paid within 15 days from the date when salary became payable to the workmen concerned and in support of this contention, reliance was placed on the judgment in the case of CIT v. Edcons (India) Pvt. Ltd. . Reference was also made on the judgment in the case of Sarangpur Cotton Manufacturing Co. Ltd. v. CIT [FB] and CIT v. Mcleod and Co. Ltd. . Reference was made to the case of Allied Motors (P.) Ltd. , for contending that this judgment is not applicable in the present case as the same was decided in a sales tax matter which is not a subject matter of beneficial legislation whereas in the present case contributions under consideration are towards provident fund and employees' State insurance contributions under the beneficial legislation.
17. The further contention of learned counsel for the Revenue is that the materials available before issuance of section 154 notice did not indicate that only the employer's contribution was under consideration by the Assessing Officer and on the contrary it should be accepted that both the contributions were under consideration as a comprehensive amount was paid for both the amounts. It is stated that even if the contention regarding the employer's contribution as advanced by learned counsel for the assessee is accepted, the said contention is not available in respect of the employees' share of contributions which is deducted by the employer at the time of paying the salary to the workmen.
18. The judgment in the case of Allied Motors (P.) Ltd. was also referred to for showing that Explanation 2 to the section was given retrospective effect by the legislation itself and therefore, it could not be relied on by the assessee. Apart from relying on the case of Podar Cement Pvt. Ltd. reference was also made to the case of P. Mahendran v. State of Karnataka, for contending that a statutory provision is ordinarily prospective and it becomes retrospective only when it is so said clearly in respect of all substantive laws.
19. Learned counsel for the Revenue also raised the contention as regards maintainability of the present appeal under Section 260A when admittedly the assessee had preferred an application under Section 254(2) of the Act for rectification.
20. After considering the above contentions of the parties and perusing the materials on record as also the judgments cited by the respective parties, we find that the assessment order was passed by the Assessing Officer and thereafter rectification proceeding was taken issuing a notice under Section 154 of the Act. The notice shows that the mistake was alleged therein in not adding back/disallowing provident fund contributions and employees' State insurance contributions paid after the due dates.
21. From the records, it is apparent that the materials available at that stage before the Assessing Officer, only had the audit report along with the statement of particulars in the prescribed Form No. 3CD and the statement of tax duty or other sum debited to the profit and loss account but not paid during the year ended March 31, 1996. Neither from the subsequent order passed by the Assessing Officer or the Commissioner of Income-tax or the Tribunal was any other record shown to be available before the Assessing Officer for exercising his power under Section 154 which shows any other material available before such officer which disclosed further materials enabling him to form the opinion that the said contributions were paid after the due dates. It is apparent that for holding a prima facie finding out what is the due date and therefore, whether the contributions were really paid after the due dates. The documents available before the Assessing Officer do not apparently disclose what were the due dates of the said contributions. Therefore, it does not appear that without holding further enquiry from the records, it was apparent on the face of it that the said contributions were paid after the due dates. In such circumstances on the said allegation, the notice under Section 154, could not have been issued and the proceeding following such notice is apparently bad. The law relied on by learned counsel for the appellant in this connection also supports such view.
22. Further in respect of payment of such contributions, the due date has to be ascertained and a finding has to be arrived at as to whether such due date is the one referred to under Section 139 of the Act or its due date under the relevant Act which provides for the payment of contribution and provident fund and employees' State insurance contributions. As apparently no opinion could be formed from the records available on the face of it for deciding such due date, the power under Section 154 could not have been exercised for rectification of the order earlier passed.
23. It further appears that in spite of the said question on which the notice under Section 154 was issued initiating a rectification proceeding, the view which was passed by the Assessing Officer in the original proceeding is also possible as such view was taken by the Tribunal as also the High Court and in such circumstances, it does not appear to be a settled position and it raises no doubt that the contributions were paid beyond the due date. The judgments cited in this connection by the appellant in the case of Fluid Air (India) Ltd. [1997] 63 ITD 182 (Mumbai); Hallmark Automation Pvt. Ltd. [1996] 54 TTJ 523 (Delhi) and Mozufferpore Electric Supply Co. Ltd. support that the proceeding under Section 154 could not have been initiated in the above view of the matter where two opinions are possible and no settled law is available showing that the Assessing Officer in the original proceeding committed a mistake.
24. In view of the above matter, we are of the opinion that in the present case neither the notice under Section 154 could be issued nor the proceeding under the said provision could be decided against the assessee in the manner it has been done.
25. In view of the above findings as regards proceeding under Section 154 of the Act, the other contentions of the parties on the merits are not being decided here following the observations of the apex court made in the case of T. S. Balaram, ITO [1971] 82 ITR 50 as follows (page 53) :
"A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question."
26. The appeal is therefore allowed and the impugned order and the proceeding under Section 154 are hereby quashed.
S.K. Gupta, J.
27. I agree.